A satisfactory explanation of the shifts in the pattern of investment financing is not feasible in the absence of adequate information on the changing methods of financing economic enterprises and organizations. The announced government policy is to shift financing progressively from the budget to the economic trusts. The shifts did not alter the fundamental fact that all investment funds, excluding the small private investment, remained public property subject to governmental controls and that the difference was merely one of bookkeeping. The change in the channeling of public investment funds was introduced in the hope of increasing the effectiveness of their use.

The realization of major investment projects, particularly in industry, has been made possible by very substantial technical and material assistance from the Soviet Union. Nevertheless, serious shortcomings have been officially reported in the implementation of investment programs, both in industrial and in residential construction. The main problem has been posed by the initiation of building programs that exceed the capacity of the construction industry and the consequent scattering of limited resources. The situation has been aggravated by frequently poor project planning, inferior design, delays in the delivery of machinery and materials, poor organization of work, and slack discipline.

As a result of the difficulties in construction, the completion and commissioning of new industrial plants has often been delayed, and housing construction has fallen chronically short of the volume planned—by as much as 25 percent in 1972. The consequent failure of the anticipated output from new plants to materialize created shortages in various areas, thereby affecting production and market supplies adversely and necessitating revisions of the economic plans. In an effort to minimize these difficulties, the government adopted various administrative measures in 1971 and 1972, including the formulation of a list of nationally important construction projects, direct supervision of which was assumed by the Council of Ministers. The number of projects included in the list for 1972 was variously reported as thirty-five and thirty-nine out of a total of more than 3,000 projects. The listed projects consisted mainly of plants for the production of industrial materials.

BUDGET

The budget constitutes the basic financial plan of the country's leadership. It is the monetary expression of the annual socioeconomic plan and provides for the financial flows implicit in that plan. The budget is comprehensive; it takes into account all aspects of the economic, social, and cultural activities of the country. In line with the government's policy of gradually placing economic trusts and their branches on a self-financing basis, a progressively larger share of the funds budgeted for the economy is being retained by the trusts rather than channeled to the budget. The sums thus retained by economic organization rose from about 3 billion leva in 1971 to a planned level of more than 5 billion leva in 1973. Ultimate control over the use of these funds, nevertheless, remains with the government, and their disposition is subject to the provisions of the budget.

The national budget is formulated by the Ministry of Finance along lines dictated by the BKP leadership and must be approved by the National Assembly. As a rule only very minor modifications are made in the process of legislative review. Budgets for local governments are prepared as a part of the national budget; in 1972 and 1973 their total amount was equivalent to about 17 percent of the overall national budget. The Ministry of Finance is also responsible for ensuring the scrupulous implementation of the budget. It is assisted in this task by a nationwide network of state and local inspectors and by agents of the banks. Actual budgetary results are directly affected by deviations from the annual economic plan and therefore seldom, if ever, correspond to the original estimates, which have the force of law.

Systematic publication of budgetary data was discontinued in the mid-1960s. Since then only scattered figures have become available through press reports on the presentation of the budget to the National Assembly and occasional articles by the minister of finance or other ministry officials.

The annual budgets have grown steadily larger. The approved budget for 1973 called for revenues of 7,057 million leva and expenditures of 7,035 million leva. In 1970 actual revenues totaled 5,723 million leva, the expenditures amounted to 5,650 million leva. Usually about 90 percent of budgetary revenue has been derived from operations of the economy, and the remainder has been raised through a variety of levies on the population. The largest single item of revenue—more than 30 percent of the total—has been collected in the form of a turnover tax on sales that has been passed on to the ultimate consumer. The second most important revenue source has consisted of levies on enterprises in the form of a profits tax, a tax on fixed capital (interest charge) and miscellaneous other deductions from income. Social security taxes based on payrolls have been the third major source. Levied at a rate of 12.5 percent through 1972, the social security tax was raised by 20 percent in 1973 in order to meet rising costs. In 1972 about four-fifths of the turnover tax and two-thirds of the revenue from taxes on profits and capital was to be derived from industry.

In December 1972 the BKP Central Committee plenum embarked upon a gradual modification of the income tax system that would eventually lead to a total abolition of income taxes for wage earners and collective farmers by 1980. Initially, the existing system is to be improved by introducing unified taxation for all blue- and white-collar workers and collective farmers and by establishing a tax exemption equal to the official minimum rate of pay. Gradual elimination of all income taxes for these population groups in the 1976-80 period is to be synchronized with the contemplated reform of wage scales. At the same time a system of progressive taxation is to be introduced on incomes derived from activities in the private sector that are not in conformity with the amount of labor invested.

The most complete recent information on budgetary expenditures is available from the approved budget for 1972. Out of a total outlay of 6,514 million leva, 3,224 million leva was earmarked for the national economy, and 2,065 million leva was set aside for social and cultural needs. The remaining undisclosed balance of 1,225 million leva, or 19 percent of the total outlays, must have included expenditures for defense, internal security, and government administration. The social and cultural expenditures included; social security payments, 1,054 million leva; education, 532 million leva; public health, 303 million leva; culture and arts, 83 million leva; and science, 93 million leva, in addition to 235 million leva to be provided by research organizations and economic trusts.